On Monday, oil prices declined as the outlook for global fuel consumption was overshadowed by Covid-19 limitations in China and the possibility of additional interest rate increases in the US and Europe.
Brent crude futures declined by $1.01, or 1.1%, to $91.83 a barrel after closing 4.1 percentage points higher on Friday. Following a 3.9 percent increase in the previous session, US West Texas Intermediate crude was down $1.13 at $85.66 per barrel or 1.3 percent.
Last week, prices barely changed as benefits from a nominal supply reduction by the Organization of the Petroleum Exporting Countries (Opec) and its allies, notably Russia, a group known as Opec+, were countered by continuous lockdowns in China, the world’s largest oil importer.
Due to Beijing’s zero-Covid policy, which encourages people to stay at home for the holidays and lowers fuel consumption, China’s oil demand may decline this year for the first time in twenty years.
According to Jun Rong Yeap, market strategist at IG, “the persistence of headwinds from China’s strengthened viral restrictions and further slowing in global economic activities could still attract some worries over a more persistent gain.”
Yeap stated that “the overall downsides seem to exceed the positives” and that it would soon be possible to see Brent crude prices reach the $85 level.
